Avaya’s Grit Pays Off

Last month saw a momentous occasion in the world of comms as Avaya not only emerged triumphantly from Chapter 11 but also re-listed themselves on the New York Stock Exchange (NYSE). David Dungay went along to talk to the Avaya senior staff to hear how they planned to right the wrongs of the past and move the company forwards after a pretty dismal 2017.

“I don’t want to go back on history because we are all about the future,” Jim Chirico stated as he took to the stage to welcome and thank customers and partners for their support through their financial difficulties. “If you go back a year ago almost to the day, it was a little bit like the weather outside. You guys showed the determination, focused on the destination, and there is that one word that I am most proud of… and that is grit.”

Chirico was heartfelt in his delivery but it was plain to see he was pumped up about leading the next stage of Avaya’s journey. There had been a lot of tension building up to the moment Avaya took to the stock market again and as the bell rang on the trading floor the relief was followed by a rapturous applause and cheers normally reserved for a sporting event.

Afterwards, I caught up with Chirico to find out how Avaya was planning to rebuild the brand and tackle a modern digital world full of competition.

“Over the last five years we have transformed and moved ourselves from a hardware-centric company to one that is software and services. Over 80% of our revenues are software and services now. Roughly 60% of that is recurring revenues.

“That movement to software and services is significant for us, we are very profitable. We did $3.3 bn in revenue last year and our EBITDA is more that 25% of revenue. Gross margins are north of 65%…” Chirico rattled of the financial metrics to bring home his point that Avaya is now financially stable.

“We generate cash flow of about 10% of our revenue. Most people don’t know that. With the restructure we also freed up over $300m of cash flow. That’s roughly $600m of cash that we have. Our competition doesn’t have that, we are going to take that as it gives us the ability to manoeuvre, invest in R&D, invest in sales, process and systems. We are going to invest in areas which I call sustained performance which means revenue growth.”

Jim Chirico (right), Avaya CEO with Thomas Farley (left), President of the NYSE

Chirico admitted that previously Avaya had been playing a defensive strategy hoping not to lose rather than trying to win. He said, “It’s like driving with the parking brake on.”

“We have over 3million seats installed today. 10% of our revenue is driven by cloud, granted that is private. 2.5m of those are UC and .5 m are CC. We are pure play, we are the only pure play provider.

Addressing questions about mounting competition from Cisco and Microsoft SVP Nikos Nikolopoulos said, “We are the world’s largest pure play; no one can do UC and CC like us, and that’s all we do.”

Nikos made the point that whilst clearly there is competition, it isn’t their focus. “You have Cisco and that’s larger, but it’s 10 per cent of their business and their other main business is something else…”

Nidal Abou-Ltaif, President – Avaya International (EMEA & APAC) took the time to talk to me inside the stock exchange and address UK partners.

“I want to thank our partners that stayed loyal to us and helped us a lot. Some of them are here today. To some of the partners that sought out alternative vendors but kept us too we do understand that and I hope we prove to them that we have walked the talk and done what we promised. We look forward to welcoming those partners back and working with them so we can grow together.

For the partners that didn’t believe in us and moved away entirely, I think they must be regretting it now. For our competition, negative selling doesn’t work. We were very transparent and committed to customers, despite all their (the competition’s) efforts to distract us from our goal during Chapter 11. During that time our goal was to firstly focus on our customers and secondly our people. I think we proved that we were right.”

One of those loyal partners present at the event was the Sabio team, specialists in the contact centre space with one vendor strategy, i.e. Avaya.

Andy Roberts, CEO of Sabio commented “We remained loyal throughout the chapter 11 process because we believed the contact centre technology was incredibly solid and there is a certain amount of pent up spend and demand from customers that haven’t moved away to different technologies that wanted to develop and bring new technologies which will sit on top of the core Avaya platform. We are expecting to see further expansion of our business and customers estates on the back of that.”

Lee Shorten, Chairman of Sabio, added, “Going onto the stock market is probably the best outcome for us. Whenever anybody goes through those kind of financial challenges, afterwards there is always a level of curiosity about the performance and strength of the business. This allows all of our customers to see Avaya’s financial strength because they have now got to be very open and transparent.”

Ed Says:

What an event! With healthy revenues and a big installed base Avaya has a chance to turn it all around. The rhetoric has changed from the top of the organisation throughout. Chirico quickly squashed any doubts about Avaya’s seriousness about the cloud and has even recently poached IBM’s Mercer Rowe to head up their new cloud unit. The competition will undoubtedly still try and hold a question mark over Avaya’s head but one thing is for sure… they are ready, and willing, for a fight.